Infosys CEO Leaves In Row With Founder -- WSJ

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (August 19, 2017).

NEW DELHI -- Vishal Sikka resigned Friday as chief executive of Infosys Ltd., citing a resistance to change at the company that deteriorated into ugly accusations of mismanagement at India's second-largest software and outsourcing company.

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The Bangalore-based company said Mr. Sikka had the support of the board but had been harassed into leaving by Infosys founder N.R. Narayana Murthy, who it claims tried to slander Mr. Sikka in letters to the media.

"Mr. Murthy's continuous assault ... is the primary reason the CEO, Dr. Vishal Sikka, has resigned," Infosys said in a news release Friday.

Responding to the statement Friday, Mr. Murthy said he is simply concerned about how the company he founded and left voluntarily in 2014 has been managed, and hasn't been trying to get money or control of Infosys.

"I am extremely anguished by the allegations, tone and tenor of the statements," he said in comments released to local media. "My concern primarily was the deteriorating standard of corporate governance which I have repeatedly brought to the notice of the Infosys board."

Earlier this year, Infosys hired international law firm Gibson Dunn to investigate allegations -- some circulated anonymously -- of impropriety and governance issues ranging from how a couple of acquisitions were done to Mr. Sikka's compensation and travel expenses. Gibson Dunn found no evidence of wrongdoing.

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Mr. Sikka said the battle was undermining Infosys's operation and staff morale.

"It is an untenable situation," he said in a news conference in which he appeared through a video link from America. "I don't want to do this anymore."

Mr. Sikka will stay on as executive vice chairman. Pravin Rao, a 30-year Infosys veteran, will serve as interim CEO and managing director while the company searches for a replacement.

Mr. Sikka was appointed in 2014, becoming the first outsider ever to head the company. He was hired to transform the outsourcing giant from a company that competed mainly on cost into a global technology brand powered by innovation.

He was scouted from German software company SAP SE to upgrade Infosys -- a trailblazer of the outsourcing model and one of India's largest and most profitable companies. In recent years, It has struggled to adjust to new technology trends -- such as cloud computing, automation and artificial intelligence -- and has faced political headwinds as some in the U.S. and the U.K. have questioned the value of outsourcing.

The company was hoping that Mr. Sikka, known for leading and accelerating the launch of sophisticated software platforms at SAP, could make Infosys an industry trendsetter again. Instead, it seems he faced unrelenting resistance, leading to anonymous letters making claims against Mr. Sikka and others.

"The constant drumbeat of the same issues over and over again, while ignoring and undermining the good work that has been done, take the excitement and passion out of this amazing journey," he said in his resignation email to the board, which was released by the company.

The company didn't delve into the issues. Analysts said Mr. Sikka's attempts to rebrand and rebuild the company were unsettling some old-guard employees and managers -- as well as the company's founders -- who didn't approve of Mr. Sikka's free-spending ways, including paying high salaries to attract outsiders.

"His plan was clashing with the old order," said Thomas George, senior vice president of CyberMedia Research. "There were forces like founders who were pulling the company in a different direction."

What this all means for the outsourcing pioneer could depend on whether new blood at the top can quell the rebellion while continuing to move Infosys into more high-growth and high-margin businesses.

Infosys shares closed down 9.6% on Friday, after hitting a three-year low.